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Naresh Goyal, Etihad Clash Over Resolution Plan For Jet Airways

After a meeting that lasted through most of the afternoon and evening on Wednesday, lenders to Jet Airways Ltd. are faced with two options — go with a plan put forth by promoter Naresh Goyal or back the minority investor Etihad Airways. Neither option is a slam dunk yet which means that a resolution plan is still to be finalised even as the airline continues to face a cash crunch.

Founder chairman Goyal has proposed to inject Rs 700 crore in the cash-strapped airline, said two people familiar with the discussions held on Wednesday. By bringing in these funds, Goyal is seeking to retain control and his board position in the full-service carrier, these people said. Both spoke on condition of anonymity since talks are confidential. Speaking on the sidelines of an event. State Bank of India chairman Rajnish Kumar confirmed that Goyal had offered Rs 700 crore and wants to retain his stake at 25 percent.

Etihad Airways, which bought 24 percent in Jet Airways in 2013, has a different plan. They are willing to inject between Rs 800-1000 crore along with partners but want Goyal off the board, said the two people quoted above. They are hoping to bring down Goyal’s shareholding to 22 percent, BloombergQuint reported on Tuesday. As per existing rules, a foreign airline can only hold up to 49 percent in a domestic carrier.

Lenders are still assessing both revival plans and seeking details regarding the source of funds in both plans.

The carrier, in a press statement on Wednesday, said it was weighing “various options on the debt-equity mix, proportion of equity infusion”. Lead lender State Bank of India, in a separate statement, added that all options are being discussed.

SBI would like to state that lenders are considering a restructuring plan under the RBI framework for resolution of stressed assets that would ensure a long term viability of the Company. Any such plan would be subject to approval of boards of the lenders and subject to adherence and clearance, if required, from the RBI and / or SEBI (takeover code, ICDR regulations etc.) and / or Ministry of Civil Aviation and in compliance with all regulatory prescriptions.

State Bank of India Statement

Jet Airways defaulted on its debt repayments on December 31, 2018, which the company reported to the stock exchanges. Following this, lenders forced promoter Goyal to flesh out a restructuring plan within three weeks. In the interim, Jet Airways sought Rs 1,500 crore in working capital loans from the lending consortium to repay vendors and employees. However, lenders rejected the proposal saying they wont lend any further till a plan for additional equity infusion is finalised.

Banks are keen to finalise a resolution plan before the account turns overdue by more than 30-days and gets classified as a special mention account. As per the RBI’s rules, banks have 180 days to finalise and implement a resolution plan before they are required to refer it for insolvency.

In order to speed up the resolution process, lenders sanctioned a ‘narrow’ forensic audit, which has not thrown up any adverse findings so far.